CBRE Boosts UK Biz with EA Shaw Buy

The world’s largest commercial real estate services firm in terms of 2011 revenue, CBRE Group Inc. (CBG), recently strengthened its presence in the EMEA (Europe, Middle East and Africa) region with the acquisition of EA Shaw in central London, UK. The acquisition marks CBRE’s second major investment made in the UK in 2012. The financial terms of the transaction were not disclosed.

Convent Garden, London-based EA Shaw provides a host of services in the region. These include management, asset management, commercial and residential investment, and leasing services. With a diverse product portfolio, the company is regarded as a leading commercial and residential property consultant in central London and enjoys a significant market share.

Post acquisition, EA Shaw will function as an operational arm of CBRE under the leadership of Adam Hetherington. CBRE as a leader in the commercial real estate services space offers well-heeded advice to real estate owners, investors and tenants. Through the acquisition, CBRE will combine its expertise with EA Shaw’s proven skills in the London residential and commercial sectors.

The acquisition is expected to be accretive to future earnings, as EA Shaw would eventually have more resources to further expand its portfolio and tap into the premier global network of the parent company. On the other hand, the transaction would complement CBRE’s emerging residential business in central London and will boost the company’s presence in London’s commercial and residential property market. Overall, the transaction is a win-win deal for both the participating companies.

London is expected to be a key market for CBRE, given its global recognition as one of the major real estate markets. According to London and St. Thomas Association of Realtors (:LSTAR), the real estate market in London is perking up after the slowdown witnessed in the past few months. The organization stated that a total of 624 homes were sold in October 2012, up 7% from October 2011. Year to date, total homes sold were 7,132, up 0.6% from the comparable period in 2011.

The past two years have seen CBRE fairly active on the acquisition front particularly in key markets of Europe and Asia. The company, on September 7, 2012, acquired Franc Warwick -- one of UK’s leading specialist real estate investment firms. In the same month, the company also acquired its affiliate company - CB Richard Ellis (Vietnam) Co. Ltd. - in Vietnam to solidify its grip in the Asia-Pacific region.

CBRE Group is the global market leader in commercial real estate brokerage and advisory services for property leasing and sales, forecasting, valuations, origination and servicing of commercial mortgage loans, as well as project and real estate investment management. The company has an extensive knowledge of domestic and international real estate markets that enables it to operate as a single-source provider of real estate solutions.

CBRE, however, reported relatively unimpressive results in the third quarter of 2012, with earnings missing the Zacks Consensus Estimate by 7 cents, as the sovereign debt crisis in Europe and a slow growth trajectory in Asia held back its momentum.

We have a long-term Neutral recommendation on CBRE. However, it carries a short-term Zacks #5 Rank (Strong Sell). One of its peers — Jones Lang LaSalle Incorporated (JLL) - carries a short-term Zacks #3 Rank (Hold).